Congress: Puerto Rico Whitefish deal created 'competence deficit'

By

Ed Adamczyk and Daniel Uria

Governor of Puerto Rico Ricardo Rosello testifies during a House Natural Resources committee hearing on the need for continuing disaster recovery .efforts in the wake of the multiple hurricanes that hit the islands, in Washington, D.C. on Tuesday. Photo by Kevin Dietsch/UPI | License Photo

Governor of the United States Virgin Islands Kenneth Mapp (L) and Governor of Puerto Rico Ricardo Rosello testify during a House Natural Resources committee hearing in Washington, D.C. on Tuesday. Photo by Kevin Dietsch/UPI | License Photo

House Natural Resources Committee Chairman Rob Bishop criticized the contract process that led to the Puerto Rico Electric Power Authority's agreement with the small Montana firm Whitefish Energy Holdings saying it displayed a "legacy of dysfunction" and had created a "competence deficit" that threatens the island's ability to improve conditions for citizens.

"This lack of institutional control within Puerto Rico's largest municipal debtor raises grave concerns about PREPA's, and by association, the government of Puerto Rico's ability to competently negotiate, manage and implement infrastructure projects without significant independent oversight," he said.

Prior to the hearing, records made public by the panel showed PREPA disregarded its own lawyers' advice when it agreed to sign the contract with Whitefish, Bloomberg News reported Tuesday.

The language in the contract could prevent federal oversight of the work and the value of the contract, which the Puerto Rican government has since withdrawn, suggesting massive overcharges by Whitefish, The New York Times reported Tuesday.

Puerto Rico Gov. Ricardo Rossello sought to distance himself and the government from the contract, telling the committee he had "no participation in this contract, zero."

"We are completely committed to transparency in this process," Rossello added.

During the hearing, Bishop told Rossello that Puerto Rico would need to close the "credibility gap" if it hoped to receive the nearly $95 million in hurricane relief aid he requested on Tuesday.

"And I do believe you need the money," Bishop added.

There were no bids that competed with Whitefish, a small company whose office is in the hometown of Energy Secretary Ryan Zinke. Another no-bid contract, worth $187 million, was issued to Mammoth Energy Services, a company better known for its work in the hydraulic fracturing industry. It entered the business of restoring downed power lines only several months ago.

PREPA lawyers warned against the terms of an expanded agreement signed on Oct. 17, raising the payment ceiling to $300 million. Much of the funding went to linemen working 16 hours per day at an hourly rate of $300 per person. Documents indicate that Whitefish would still keep $1 of every $2 it billed PREPA, The Washington Post reported Tuesday.

Mammoth Energy said its contract could not be compared to that of Whitefish, noting that its experience in far-flung oil drilling sites includes the logistics of housing employees and other factors.

"We're a substantive organization with 1,400 employees," Mark Layton, Mammoth's CFO, told Bloomberg News. "What we went to PREPA with was a turnkey solution -- personnel, equipment, security, as well as housing -- to go in and supply power."

Mammoth Energy has 250 linemen in Puerto Rico rebuilding the power lines at the rate of $4,000 each per day. The company, however, has no experience with a project of Puerto Rico's complexity. It purchased two small companies in the electricity business this year, Bloomberg News reported.

Ricardo Ramos, executive director of PREPA defended the utility's decision to sign the deal with Whitefish.

"After reviewing about a half-dozen proposals from potential first responders, we found that only two offered the immediate services that PREPA needed. One proposal required a guaranteed payment of $25 million, the other -- from Whitefish -- offered PREPA the ability to pay only for work that was completed," Ramos said.

Ramos said he authorized the Whitefish deal while continuing to seek additional assistance from others for the multibillion dollar restoration effort, while adding the electric company "could have done better" with certain aspects of the contracting process.

"I chose to contract with Whitefish because my priority was securing the immediate assistance that we needed to begin restoring power as quickly as possible to our most critical customers," he said.